The spending power of Britain’s hard-pressed consumers is slightly increasing as inflation falls and wages rise compared with last year.

 

The recent sales uplift brought about by the good weather appears to be more sustainable than initially supposed. Retail has been on a downhill trajectory since the stunted holiday season last year, with household brands such as Toys R Us and Mothercare surrendering to insolvency as a result. Now, accelerated wage growth and steady employment have given consumers and business owners a big boost. With the weather improved, this has all led to invigorated spending behaviour.

The latest Asda Income Tracker, which charts household income after tax, has found that last month spending power was £16.56 higher compared with a year ago. It is also the fifth consecutive month of growth, despite rising fuel prices.

As consumers flood to parks, beaches and back gardens to celebrate the good weather, some are altering their prior thrifty behaviour. According to a separate survey, sales in spirits and soft drinks have risen, with consumers allowing the good weather to motivate their financial behaviour.

The notoriously cold British summer has warmed up, with the economy similarly showing signs of improvement. Consumers cannot be expected to change their behaviour alone, and businesses must also make an effort to gauge interest. At the Credit Protection Association, we encourage our Members to free up cash flow which can then go towards building up their business and thwarting competition.

Kay Neufeld, managing economist at CEBR, said that households continued to benefit from falling inflation, which was 2.4 per cent in the year to last month and robust wage growth. He said: “Inflationary trends subside across most categories, though rising oil prices are a source of worry for motorists.”

Kay Neufeld, managing economist at CEBR said that slowing price increases meant that consumers were able to enjoy higher wage growth without having to pay more for their essential items. However, the “most significant upward contribution to inflation” came from transport costs, he said.

Consumers have so far exercised caution when spending their money, with many resisting purchasing big-ticket or non-essential items. While this behaviour highlights an improved management of finances, stronger consumer spending is detrimental towards a healthy economy. As weight is lifted from households’ shoulders, consumers are loosening their purse strings.

The Asda research found spending power increased, but businesses need to do their part to sustain it. By freeing up cash flow and approaching a third party, businesses can ensure new opportunities are available to them.

At the Credit Protection Association, our debt recovery services chase down unpaid invoices and reward our Members with greater financial stability. This has led many business owners to purchase new products and hire marketing leaders, all to encourage brand image and secure higher profits; even when the weather turns colder.

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The Latest Insolvencies to 27 Jun 2018

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